Labour law reform in France: an appaling mess

While social tensions threaten to bring the country to a halt and the government stubbornly refuses dialogue and compromise, the labour law appears increasingly clearly for what it is: an appalling mess, one more on the list of failures in this five-year term of government and perhaps the most serious.

The government would like to have us believe that it is paying the price for reforming and that it has to fight all forms of conservatism single-handed. The truth is quite different: on this subject, as on the previous ones, those in authority are stepping up their improvisations, lies and cobbled-together solutions.

We have already seen this at work in matters of competitiveness. The government began by ending the reductions in employers’ contributions enacted by the previous government before setting up an unbelievably labyrinthine system, which took the form of a tax credit aimed at reimbursing firms for part of their contributions paid one year earlier. The consequence was an enormous online loss linked to the lack of legibility and of longevity in the arrangement. On the contrary, what was required was to launch an ambitious reform in the financing of social protection.

Lack of preparation and cynicism

The labour law is another example of the same mix of lack of preparation and cynicism. While unemployment has risen continually since 2008 with one and a half million more unemployed (2.1 million category A job seekers in 2008, 2.8 million in mid-2012 and 3.5 million mid-2016), it is not because the labour law has suddenly become more rigid. It is because France and the Euro zone, as a result of their excessive austerity measures, provoked an absurd fall in economic activity in 2011-2013, in contrast to the United States and the rest of the world, thus transforming a financial crisis which came from across the Atlantic into an interminable European recession.

If the government were to begin by recognising its mistakes and, above all, by drawing the consequences for a democratic reshaping of the Euro zone and its budgetary criteria, it would be much easier to conduct the debates on the reforms which do have to be implemented in France.

It is even more regrettable because the labour law does deserve proper discussions. The increasing use of short-term contracts has never helped to lower unemployment. A bonus-malus system enabling us to more fully involve employers who take advantage of vulnerability and unemployment benefits, is long overdue. More generally, the use of short-term contracts should be restricted to cases where it is really justified, and permanent contracts or contracts for an indefinite period should be made the norm for new hires with, as counterpart, a full clarification of the conditions for breaking or terminating a contract which often contain too many uncertainties for both employees and employers. These were the conditions for a balanced reform, based on a two-way deal which the government has unfortunately been unable to present to the country.

The focus of the discussion is now on Article 2 of the labour law which intends henceforth to make company agreements the new norm; these will be subject to derogation from the trade union agreements and also from national law, in particular in matters of organisation of working hours and the payment of overtime. This is a complex issue and does not lend itself to easy answers, as we can see moreover from the thickness of the bill (the whole bill is 588 pages, of which 50 are devoted to Article 2 alone). It is obvious that some very specific decisions concerning work breaks and work schedules can only be taken at company level. In contrast, there are others which are more structural and must be decided at national level, otherwise widespread competition between companies may lead to social dumping. For example, countries which have no ambitious national legislation as regards paid leave find that employees take very little leave, despite the rise in salaries over time which is something of an absurdity collectively.

The illusion of balanced company-wide agreements

As far as company-wide agreements are concerned, some consider their rise in Germany in recent years is one of the keys to the present success of the German model (see this study for example). The discussion is open and it is legitimate. However we must stress two points. In the first instance we should bear in mind that Germany’s solid performance in matters of employment is in part explained by the abnormally high level of its balance of trade: over 8% of GDP on average over the past 5 years. In other words, each time that Germany produces 100 Euros of goods or services, the country only consumes and invests 92 Euros on German soil. For the record, there is quite simply no historical example of an economy of this size operating such a high and lasting trade surplus.

True, this is in part explained by the advantages of the German social and industrial model and in particular its excellent insertion in the new channels of production in Central and Eastern Europe created by the recent enlargement of Europe in the years 2000. But this is also explained by excessive wage moderation which has probably been exacerbated by the rise in company level agreements and widespread competition between production sites and which, in the long run, amounts to taking a share of the economic activity of their neighbours. If this type of strategy were to be extended throughout Europe, then by definition, it would be doomed to failure: no country in the world could absorb this type of trade surplus. It would only aggravate the present trend which is leading our continent straight into a lasting regime of low growth, wage deflation and high indebtedness.

Most importantly, one of the strengths of the German model is that it is based on strong and representative trade unions. Given the weakness of French trade unions and their location, it seems unrealistic to want to develop balanced agreements at company level. In view of this, it would be preferable to re-write Article 2 to give preference to branch agreements, which, given the present reality of French trade unionism, constitute the most relevant and the most promising level. As Thomas Breda’s research has clearly shown, trade union delegates are almost non-existent in most French companies, not only in the smallest but also in those of average-size, partly because of the proven wage discrimination to which they are subjected.

Here we find the culture of conflict so dear to a considerable number of French employers, as has just been illustrated once again by the head of the Medef (French Employers Federation) with his stupidly insulting remarks about the CGT (Confédération Générale du Travail, oldest and largest trade union in France). In Northern Europe, trade union representatives have been playing a major role on company boards of directors for years now (one third of the seats in Sweden, half of the seats in Germany) and employers have learnt all the benefits they could gain from a greater involvement of wage earners in the company’s strategy. This model of co-determination, invented after World War Two, could be improved further in the future, for example by giving wage earners votes in the general meetings of shareholders, which would then become joint meetings. This would enable managing directors to be appointed on the basis of development projects which would be profitable for both parties. But at the moment, France is still in its infancy in matters of social negotiation and economic democracy.

Circumventing professional elections

In more general terms, the main weakness of the labour law is that it does not take sufficiently into account the weakness of French trade unions and the means to remedy this. Worse still, the labour law includes clauses likely to weaken trade unions and their representatives even further. This applies in particular to the referendums at company level presented in Article 10. The aim is to enable employers to impose by referendum – and under conditions that could frequently be likened to blackmail – agreements which may however have been rejected by trade unions representing as many as 70% of the employees of the company at the last union elections.

It is understandable that in certain circumstances the CFDT (Confederation Française Démocratique de Travail, second to CGT, more center-left) may stand to gain: with 30% of the votes, this would enable it to circumvent the other unions and, in particular, the CGT (Conféderation Générale de Travail) and to negotiate an agreement directly with the employer. The fact remains that this circumventing of the union elections (which take place every 4 years) amounts to going back on the few democratic advances in reform of union representation which had just been implemented in 2004-2008, and which, for the first time, had given trade unions with 50% of the votes the deciding role in the signature of company agreements (whereas the previous regime enabled each of the five historical unions in 1945 to sign agreements, whatever their representativeness in the company, which did little for the French social model).

All the evidence from around the world demonstrates that economic democracy requires intermediary instances. It is not by relegating a considerable part of the trade unions and French society to opposition and frustration that France will emerge from the crisis.